FILED: NEW YORK COUNTY CLERK 11/07/ :41 PM INDEX NO /2016 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/07/2017

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1 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X ESRT EMPIRE STATE BUILDING, L.L.C., Index No. / (Lebovits, J.) Plaintiff, -against- NOTICE OF ENTRY PACIFICA FOUNDATION, INC., Defendant X PLEASE TAKE NOTICE that the within is a true copy of the order dated October, in this proceeding and entered electronically in the Office of the Clerk of the County of New York on November,. Dated: New York, New York November, STERN TANNENBAUM & BELL LLP By~ Rosemary Halligan Jessica Eyland 0 Lexington Avenue New York, New York () - Attorneys for Plaintiff ESRT Empire State Building, L.L. C. TO: Samuel J. Himmelstein Jesse Gribben Himmelstein, McConnell, Gribben Donoghue & Joseph LLP Maiden Lane New York, NY 0 () -000 Attorneys for Defendant 000.DOCX v of

2 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ (FILED: NEW YORK COUNTY CLERK llfl(}'f'lo:f:i?i P. NYSCEF DOC. NO. RECEIVED NYSCEF: / 'I 'l ~ SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY : CIVIL TERM : PART ~ X ESRT EMPIRE STATE. BUILDING, L.L.C. - against - PACIFICA FOUNDATION, INC., Plaintiff Defendant X B E F 0 R E : HONORABLE GERALD LEBOVITS APPEAR. AN C E S : Ind. No. / 0 Centre Street New York, New York October, Justice STERN TANNENBAUM & BELL LLP Attorneys for Plaintif f 0 Lexington Avenue New York, NY BY: ROSEMARY HALLIGAN, ESQ. '" EMPIRE STATE REALTY TRUST Attorney for Plaintiff West rd Street New York, NY BY: JONATHAN KOTLER, ESQ. HIMMELSTEIN, MCCONNELL, GRIBBEN, DONOGHUE & JOSEPH LLP Attorneys for Defendant Maiden Lane New York, NY 0 BY: SAMUEL HIMMELSTEIN, ESQ. Kathy Y. Jones Official Court Reporter of of

3 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK J~J'W0El :ff:: A NYSCEF DOC. NO. RECEIVED NYSCEF : /0/. (_; THE COURT : Please be seated. Appearances please. MS. HALLIGAN : Rosemary Halligan, Stern Tannenbaum &.:and Bell LLP for plaintiff ESRT Empire State Building LLC.and with me is Jonathan Kotler. He's ;!.\ in-house counsel for Empire State Realty Trust. MR. KOTLER : Good morning, your Honor. Jonathan Kotler, in-house counsel for Empire state Realty Trust. THE COURT : Hello to both of you. MR. HIMMELSTEIN: For defendant Pacifica Foundation, Himmelstein, McDonnell, Gribben, Donoghue & Joseph by Samuel Himmelstein and with me is my associate Jesse Gribben. MR. GRIBBEN : Good morning. on for today. THE COURT : I understand there are two motions... -,:.. MS. HALLIGAN: That's correct, your Honor. THE COURT : Which one should we do first? MS. HALLIGAN: Your Honor, motion sequence one is ESRT's motion for summary judgment. I think it somewhat dovetails with the second motion which is the motion by Pacifica to amend its answer lj to assert defenses of unconscionability so I think it would probably make sense to start with the motion for summary judgment. of of

4 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK f~fw0~ ~?. NYSCEF DOC. NO. RECEIVED NYSCEF: ~0/ A MR. HIMMELSTEIN : May I be heard for a moment, your Honor? THE COURT: Yes. Do you disagree? MR. HIMMELSTEIN: I think in some sense it makes '~ more sens e to start with the motion to amend because THE COURT : I agree, Mr. Himmelstein. MR. HIMMELSTEIN: Because the s ummary judgment TH!i:' COURT: I agree, Mr. Himmelstein. Let ' s begin with that.., MR. HIMMELSTEIN: May I be heard? THE COURT: Yes. MR. HIMMELSTEIN : As your Honor may know, ~ Pacifica is the parent corporation of radio station WBAI which is New'York's non-profit progressive radio station that has been on the air for decades and has been broadcasting,off of the antenna at the Empire State building for decades. Everything was fine until recently when a combination of the massive escalation in the most recent license agreement has now forced the rent if you would call it that up to around $,000 per month. Pacifica being a listener-sponsored non-profit station began falling behind in its rent in. THE COURT : I am sorry about that. of of

5 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK L 0~f'J0'?: NYSCEF DOC. NO. RECEIVED NYSCEF: ~0/ A MR. HIMMELSTEIN: There was a holdover proceeding wh.ich was settled. There were several settlement discussions and meetings during which the parties agreed that Pacifica can pay $,000 a month as the parties attempted to negotiate a settlement. That "i went on for a pproximately three years when this action to collect the a rrears was commenced. When we originally filed our answer, there were certain facts unknown to me which I subsequently discovered which I believe support a defense of unconscionability. (j The most recent license agreement was entered into in 0 shortly after the collapse of the World Trade Center which was the other antenna at the time and it gave the Empire State Building inordinate bargaining power to essentially put our clients in a non-negotiable position of entering into a lease which at first was affordable to them but given the percent annual cost of living increases, the rent increase in the lease has now made it impossible for them to make those payments. of $ million. There are now arrears of somewhere in the order so, we promptly moved to amend the answer as soon as we discovered this. There is no prejudice conceivable to the plaintiffs. The discovery hasn't even of of

6 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK NYSCEF DOC. NO. RECEIVED NYSCEF: /0/! I begun because of the summary judgment motion. It's still ~ early in the case and we believe that we make out a prima facie case of unconscionability as I'm sure your Honor is aware the standard on a motion to amend is whether we have an arguable defense and whether it really should be in the case. So, I think that has to be addressed first because their motion doesn't address that issue because it was made before we made our motion to amend. Thank you. THE COURT : Thank you, counsel. Ms. Halligan. MS ; HALLIGAN : Your Honor, I don't want to mince words. I mean, even by Mr. Himmelstein's recitation, what he's asking the Court to do is remake a contract that has been in effect since 0. It's an extension of a contract from that nobody argues was unconscionable. In that 0 negotiation, they were represented by counsel. And tellingly, your Honor, in the last years nobody has complained that it was unconscionable even if, which is not true, as we set forth in the affidavit of Tim Pecaro, that the Empire State Building had increased bargaining power after the / tragedy, which again is not the case, with the extension of the agreement. But even if that were the case, that of of

7 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ [FILED: NEW YORK COUNTY CLERK l]!:yl(m>n>0? f:: A NYSCEF DOC. NO. RECEIVED NYSCEF: ~0/ market conditions could rise to the level of unconscionability, they haven't made out that case here. Mr.. Pecaro s affidavit rebutted the statements in Mr. Crigler's affidavit. He could have put in a reply. He went silent and did not. So, I do think that under the First Department's requirement that there has to be some sort of factual showing to su'pport the amendment and they have failed there. As.the Court knows, it's not a ~ubber stamp. I understand t~at it;s not a high bar to amend a pleading but the Court has to look at whether it's patently meritless and we think in this case it's patently meritless. Again, it's been in the case THE COURT: You don't have to repeat yourself, counsel. Yo~'re done? MS. HALLIGAN: I want to point out, your Honor, there are two aspects to unconscionability. There's procedural. There's no argument here that anybody lied or took advantage of a consumer. Then there's the. substantive argument that this would be unprecedented if the Court were to allow an unconscionability defense to be proffered under these circumstances in a commercial context. of of

8 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ [FILED: NEW YORK COUNTY CLERK ll!jrmjn0 :f?: A NYSCEF DOC. NO. RECEIVED NYSCEF: ll'i0/ Thank you, your Honor. THE COURT : Thank you. Mr. Himmelstein. MR. HIMMELSTEIN: Yes. We actually do make out a case contra-ry to what my colleague said and the affidavit that they put in on response was full of conjecture and hearsay and speculation, that's why we didn't put in a reply. We didn't feel we needed to. We felt that we made out the case and it was not rebutted. THE COURT : Thank you very much. This is motion sequence number. The defendant moves for leave to amend its answer under :CPLR 0 (d) in this case. Plaintiff moved for summary judgment in April. Defendant opposed the motion in June and as of July defendant moved to amend its answer to add the defense of unconscionability. The law amending an answer under CPLR 0 is that the party may amend his pleading or supplement it at any time by leave of court. Each shall be freely granted upon such terms as may be just. The Courts have found that although leave to amend is fre~ly granted, when leave is sought to amend pleadings, that the Court must be satisfied that there are sufficient grounds to support the amended pleadings. So, a mot~on for leave to amend calls upon the KATHY Y.. JONES, OFFICIAL COURT REPORTER of of

9 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/., [FILED: NEW YORK COUNTY NYSCEF DOC. NO. RECEIVED NYSCEF: ~0/ Court to review the validity of any positive action sought to be added. The law of unconscionability is as follows: unconscionable contract is one that is so grossly An unreasonable as to be unenforceable because of the absence of meaningful choice on the part of one of the parties together with- contract terms that are unreasonably favorable to the other party. It requires the showing that the contract is both procedurally and substantively unconscionable when made, that there's an absence of meaningful chbice on the part of one of the parties together with contract terms that are unnecessarily favorable to the other party. Unreasonably favorable is sometimes referred to as substantive unconscionability. The absence of meaningful choice is referred to as procedural unconscionabiiity. Both are necessary to be established as a ground to set aside a contract. The Court should freely amend -- grant leave to amend an answer. Defendant's argument for the defense of unconscionabi.iity centers around two sets of facts. First that the rent is four times more than the market price, and second, because of the September, 0, attacks and destruction of the World Trade Center, the option for KAT~Y Y. JONES, OFFICIAL COURT REPORTER of of

10 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK l!njj )tp.o?%fqf! NYSCEF DOC. NO. RECEIVED NYSCEF:,0/ broadcasting.antennas in New York were limited. The contract in question is a commercial contract. it is not a residential contract and it was signed in 0 and has been in effect since 0. For the defense of unconscionability, a party needs to prove that the contract was both procedurally and substantially unconscionable at the time of its formation not now but in 0. The Court finds that defendant offers no evidence that it had no meaningful choice instead of entering into a contract with plaintiff to establish the procedural unconscionability. so, the Court does not find sufficient grounds to support the defense of unconscionability. Therefore, the motion for leave to amend the answer is denied. Next motion please. MS. HALLIGAN: Your Honor, ESRT has moved for summary judgment on its complaint. of action for breach of contract. license agreement. It contains one cause It's a lease and Here it is undisputed that the defendant is in breach of the agreement. Instead, what they offer to try to thwart the entry of summary judgment are really two defenses and they center around the fact as Mr. Himmelstein alluded to, that the Empire State Building did of of

11 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ [FILED: NEW YORK COUNTY CLERK Jf Yf< 0 f~ NYSCEF DOC. NO. RECEIVED NYSCEF: f/ l accept lesser amounts over about two and a half years before it commenced the action. They assert again a defense of waiver and a defense of laches. The laches I think is very quickly disposed of, your Honor. commercial lease context. It's just not applicable in a Also, there's nothing that, even if that were not the law, and that is the law, there's nothing that the Empire State Building or ESRT did to induce Pacifica to change its status. It came into the situation saying that it didn't have the funds to pay the amounts due under the lease. waiver arguments. So, we're left with the The problem with them, with the waiver argument, is that the contract that was agreed to by the parties, specifically states that the acceptance by the Empire State Building of lesser amounts will not constitute a waiver and the provision in the lease is found in Article and that is not surprisingly supported by the Court of Appeals in the I think it's Jefpaul case. THE COURT : Jefpaul Garage. MS. HALLIGAN: It's Jefpaul Garage. Thank you. Where the. court said where waiver may be inferred from acceptance of rent in some circumstances, it may not be inferred and certainly not as a matter of law to frustrate the reasonable expectations of the parties of of

12 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ (FILED: NEW YORK COUNTY CLERK PJlW~ QiS'jl \S0lli NYSCEF DOC. NO. RECEIVED NYSCEi:!/ embodied in a lease when they have expressly agreed otherwise. That is what has happened here, your Honor. I think that defeats that argument. I would also point out that the case that So, Pacifica cites in support of its waiver argument is where a landlord has again induced some sort of action on behalf of the tenant and then tried to take advantage of it. For' example, your Honor, the. cases that are cited by them and we discuss this in our reply brief are there's a no pet provision in the lease. The landlord allows pets and then tries to default the tenant because he had a pet. That is certainly not the situation here. This is the passive conduct of accepting lesser amounts that is again a situation that is accounted for in the lease. The last thing I will say, your Honor, is there is no corroboration. There are only two affidavits. One of Mr. Agarwal. He has no personal knowledge. I mean, his affidavit adds nothing. The second is Mr. Reimers who said that he was at this meeting where supposedly some sort of inchoate agreement, by his own admission, not a fully-formed agreement, was entered into by the parties under which ESRT agreed to accept a lesser amount of fixed rent and fees. of of

13 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ [FILED: NEW YORK COUNTY CLERK!~~!~ ~~~~ NYSCEF DOC. NO. RECEIVED NYSCEF: ll.hl/ 0- Again, there is not one iota of corroboration. And also even his statements are that it was his unde~standing and they had. subsequent meetings. I mean, he doesn't even really say that there was an agreement reached. I don't. know if the court wants to hear about the fact that; they say that we agreed to this because they are in dire financial situation. We don't believe that that's the case but 'it~ s irrelevant again to this commercial. di~pute. THE : COURT: What relief are you seeking in this action?, MS.,, HALLIGAN : We are seeking an award and a judgment in t 'he amount of -- bear with me, your Honor. Let me get th; exact amount. THE ; COURT: You're asking for a money judgment? MS.,; HALLIGAN: For money judgment, your Honor. And we would :like an. inquest set for attorneys' fees. amount is set forth in our notice of motion. The THE COURT:,,.... MS., HALLIGAN: Yes, and then we're asking for an inquest to be'set down to set our attorneys fees. THE COURT : Understood. So, we understand that even. if you win, you. can't evict. MS. - HALLIGAN: That's right. We're not looking of of

14 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK ll~~jl trt~ NYSCEF DOC. NO. RECEIVED NYSCEF: ~/ to terminate the lease, your Honor. judgment for our arrears. We're looking for a THE COURT: You've got years in which to collect it; is that true? MS. HALLIGAN : I think so, your Honor. THE COURT : Thank you. B MR. HIMMELSTEIN : The issue in this motion. I think we all understand the law of waiver, of a known relinquishment, of a known right, has to be intentional and the courts have repeatedly held that even a no waiver clause can be a waiver and the issue now before you is not the ultimate validity of a defense but it's whether or not a factual dispute exists as to whether that defense should be litigated. There are several decisions that we cite that say those issues are best resolved at some sort of a hearing or trial. So, I believe it would be premature at this point based on the papers before you to grant summary judgment. Rather what should happen is that that issue should be preserved for trial and discovery so we can see whether in fact there was a waiver. MS. HALLIGAN : The no waiver provision here, your Honor, goes exactly to what they are arguing, Pacifica is arguing, was waived. This isn't some sort of of of

15 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK fl@/'? :f g; A NYSCEF DOC. NO. RECEIVED NYSCEF: t/ broad waiver that is a fit all. This is a no waiver when ESRT accepts lesser amounts and that's the premise on which they are arguing ESRT did waive. It's a pure matter B of contractual interpretation, your Honor. We preserved our right to accept lesser amounts. They're arguing that shows that we waived and it just is not true under the plain language of the agreement. THE COURT.: Thank you. This is motion sequence number one. Plaintiff moves for summary judgment alleging that the defendant breached a lease_agreement and it seeks an order to schedule an inquest for attorneys' fee. The facts are as follows : on or about June, 0, plaintiff ESRT Empire State Building entered into an agreement of iease and license agreement with the defendant Pacifica Foundation in which defendant agreed to pay plaintiff to use inputs on the antenna and lease a room in the Empire State building. The contract commenced on June, 0. It will expire in.april. The defendant was current on all payments as of June 0,. Unfortunately, starting from July, defendant did not pay full amounts to the plaintiff and the parties agreed. to that. This is not an allegation made by one side and disputed by the other. Plaintiff moves for summary judgment and an of s of

16 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK ft f< 0i '!!:Q~ NYSCEF DOC. NO. RECEIVED NYSCEF : /0/ B u order scheduling the inquest. Defendant argues that on or about mid July,, they met with the plaintiff and informed the ' plaintiff that because of its dire financial situation it could not continue to pay the monthly amount. Commencing July, the defendant tendered $,000 to the plaintiff without objection from the plaintiff for two and a half years. Defendant argues that it's their understanding that the plaintiff would accept less than full monthly payment until' such time as the parties were able to negotiate a comprehensive resolution. Furthermore, the defendant argues that acceptance of the reduced amount by plaintiff is a waiver of the plaintiff's right notwithstanding a non-waiver clause in the contract. The motion for summary judgment, the proponent must make a prima facie showing of entitlement to judgment as a matter of law tendering sufficient evidence to eliminate any material issues of fact from the case. The party opposing the motion must demonstrate by admissible evidence the existence.of factual issue prior to trial. Mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient. of of

17 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/ [FILED: NEW YORK COUNTY CLERK ll~f'j' llbftf' ~ NYSCEF DOC. NO. RECEIVED NYSCEF : / -u The law on a breach of agreement is that to establish a prima facie case of a breach of lease, plaintiff must demonstrate the existence of a lease between plaintiff and defendant, performance by plaintiff, defendant's failure to perform and the damages resulted in the failure to perform. The law on waiver is that waiver is the voluntary abandonment of relinquishment of a known right. It is essentially a matter of intent and the side that seeks to show waiver must prove it. While waiver may be inferred from the acceptance to grant some circumstances, it may not be inferred and not as a matter of law to frustrate the reasonable expectations of the parties embodied in a lease when they have expressly agreed otherwise. And the law on laches is that there are four elements of laches which the party asserting laches must show, conduct by defending party to arise to the situation complained of, delay by the complainant asserting his or her claim for relief despite the opportunity to do so, notice or knowledge on the part of the defending party that the plaintiff would assert a claim for relief and injury or prejudice to the offending party in the event that the relief is afforded to the plaintiff. Mere delay below without actual prejudice does of J(ZI'T'UV V,T()~Tl<~ ()l"l"tf"tzit, rntm't' Rl<PI"IR'T'J<J;> of

18 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK COUNTY CLERK lllj(}'f'ji' ey?!:g>! NYSCEF DOC. NO. RECEIVED NYSCEF: Yb/ ]. not constitute laches and all of this is not entirely relevant because laches does not apply to commercial cases and this is a commercial case. The breach of the lease agreement is substantiated by uncontroverted facts. The defendant did B not provide evidence of the waiver given that the agreement's language is clear about the parties expectations. Article of the lease agreement between the parties states and I quote "No endorsement on any check or letter accompanying rent shall be deemed an accord and lj ]. l.b satisfaction and such check may be cashed without prejudice to the landlord. No waiver of any provision of this lease shall be effective unless such waiver shall be in writing signed by the landlord. The lease contains the entire agreement between the parties and no modification thereof shall be binding unless in writing and signed by the parties concerned. " A non-waiver clause can be waived by a party under facts inferred by some circumstances but in this case defendant argued only that it was their understanding that there was a waiver and offered no evidence of any. issue except alleging that plaintiff did not object for a period of time to the payment of reduced rent. of of

19 FILED: NEW YORK COUNTY CLERK /0/ 0: PM INDEX NO. / NYSCEF DOC. NO. RECEIVED NYSCEF: /0/!FILED: NEW YORK NYSCEF DOC. NO. RECEIVED NYSCEF: ',lll)l0/ That's the case. It's a matter of kindness not. required by the lease and not affecting the future. Defendant has asserted the defense of laches without providing the Court with evidence that would establish the existence of a factual issue that could challenge the granting of summary judgment. The agreement is also clear on attorneys' fees and defendant did not provide the Court with any defense regarding the validity of that clause or anything else about the lease. Therefore, this Court grants summary judgment in the amount of $,,. and orders an inquest to determine the fair and reasonable amount of attorneys' fees. This Is the judgment of the Court. Thank you so much. MS. HALLIGAN: Thank you, your Honor. MR. KOTLER: Thank you, your Honor. R T proceedings. Certified 0 OFFICIAL COURT REPORTER of of